Rand gains the most against dollar in six weeks

The dollar had its worst day since July, as a manufacturing report came in weaker than expected. The prospect of a trade war between the world’s two largest economies has
been one of the major factors weighing on emerging markets, together with the prospects that accelerating growth and inflation in the US would cause the Federal Reserve to raise rates faster, drawing capital away from riskier markets.

Emerging-market currency rallied because “of some prudent words from Trump”, said Marc-Andre Fongern, founder of German-based MAF Global Forex. Although SA is relatively small compared to major emerging-market economies such as China and India, it has one of the most easily traded currencies, meaning the rand tends to move disproportionately in times of volatility. On the way down investors may sell the rand to make up losses from other markets where it is harder to move money in or out.

The rand is still down more than 14% in 2018 and has been cited by the Reserve Bank as one of the most important risks to the inflation outlook. If gains are sustained, that may reduce the chances of the Bank raising interest rates in 2019. The currency came under pressure this year as the economy slipped into a recession, and was also hurt with policy uncertainty around property rights.

It was also a good day for SA stocks, with the all share index gaining 2.27% to its best level in more than two weeks.

[email protected]

Source: businesslive.co.za